Could a 'zombie' UK be the answer to Brexit transition dilemma over EU laws?
3 October 2017. By Matthew Holehouse, Lewis Crofts and Simon Taylor.
The UK and EU want a transition period to bridge the gap between Brexit day in March 2019 and the start of a new trade and security deal.
After a year of dithering, UK Prime Minister Theresa May has now made getting swift agreement on such a period a political priority.
UK-EU market access "should continue on current terms" for around two years, May said in Florence last month. In short, nothing should change — except the UK will lose its voice at the negotiating table.
The EU has welcomed May's words. But a major question remains to be resolved: Should the UK be obliged to apply new EU laws during the transition period — laws that it will have no hand in shaping?
EU negotiating guidelines say that any transition deal will require "existing union regulatory, budgetary, supervisory and enforcement instruments and structures to apply."
But does this imply an obligation for the UK to apply new EU legislation after exit day?
May ducked the question in Florence and again in a BBC interview on Sunday. But Foreign Secretary Boris Johnson has insisted that the automatic flow of new laws has to stop on exit day.
Some EU officials think it's unavoidable, arguing that the EU is by its essence a dynamic, continually evolving body of law. All member states, European Economic Area signatories, and countries working to join the bloc are obliged to keep pace with its changing rulebook. Exempting the UK from this burden would give it better terms than any remaining member state, something the EU is keen to avoid.
Failing to take on new laws would also create legal uncertainty, says Laurent Pech, a professor of European law at Middlesex University London.
"The smooth, continued and effective application of EU law may be imperiled if EU law adopted before the UK exit is dependent upon the adoption of EU implementing rules post-exit," Pech told MLex.
"This is not to say that having a 'zombie' member state would be ideal, but it would seem to be the only solution in the absence of any willingness to just maintain full UK membership until everything is in place."
But this route carries practical problems for both sides. EU officials have questioned whether turning the UK into an effective colony is sustainable, even for a limited period.
At the same time, the EU legislative machinery rarely pauses. That's especially so in financial services, where laws typically call for reviews after a few years. Lawmakers could use any proposals to try to put constraints on UK companies, without British representatives to argue their case for open markets.
Such proposals would run counter to the UK's interests and would meet resistance in London. But refusing to implement them would violate the fragile transitional agreement.
There is, therefore, a risk of a standoff that could paralyze the EU's legislative agenda until the British transition period is over.
Also unclear is how this arrangement would interact with the UK's domestic legal order. The country plans the repeal on exit day of the 1972 European Communities Act, which acts as the transmission belt for EU regulations into domestic law.
The EU (Withdrawal) Bill gives ministers broad powers to make legislation to implement the exit agreement. This could in theory be used to create a replica of the 1972 act, but such a move would be deeply controversial with UK lawmakers.
Alternatively, would the UK agree to implement new EU legislation in domestic law piece by piece?
This might be one solution: for the two sides to muddle through. The UK could declare a standstill, whereby EU legislation in the UK is frozen on March 29, 2019. Fresh legislation would then be examined case by case.
Given that new EU legislation takes several years to go from drafting to implementation, the dilemma may in reality only involve a handful of laws. Most laws proposed during the transition period will only come into force long after the UK's departure.
Both sides may agree that some laws should be implemented in the UK, to maintain an equivalence with EU standards and facilitate future trading. Others could be irrelevant to a departing state and could be discarded.
The EU already sees this as a potential model for its long-term relationship with the UK. The European Commission has published a paper that proposes creating a joint committee to "decide on the incorporation of future amendments to union law" once the UK's withdrawal is complete.
The risk in this is that EU law operating in the UK would fall behind the continent. This could present a barrier to trade, but it's not unprecedented: For example, under the EU-Swiss sectoral agreements, Switzerland operates much older iterations of EU legislation.
The overriding priority for the EU will be to make sure the UK maintains EU basic standards, and doesn't engage in a regulatory "race to the bottom" while still in the single market, said Tobias Lock, senior lecturer in EU law at Edinburgh University.
"Norway follows the acquis [the body of EU law] by incorporating new rules into the EEA agreement, but the Swiss don't have that dynamism built into their arrangements with the EU, which will often rely on old rules," Lock told MLex.
Lawmaking may be the least of the UK's problems. The EU's institutional machinery is simply too slow to squeeze in much legislation into the two-year transition.
But in that period the EU could still adopt hundreds of decisions — on aspects such as subsidies, trade defense and drug authorization — which would come into force immediately.
While the UK might not like some of them, they constitute the very bedrock of what it means to be in the EU's single market, and are therefore more difficult to dodge.
Still, it's easy to imagine a case where the EU orders a British government, as it heads out of the bloc's doors, to recoup tens of millions of pounds in illegal aid granted to a UK company.
A case like that could be the perfect lightning conductor for UK government ministers' misgivings about a transition period that keeps Britain under the EU's oversight while outside the club.